July London 2012 Olympic and Paralympic budget report published

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Anticipated Final Cost down £6m despite impact of Emergency Budget

The London 2012 Olympic and Paralympic Games remains on time and within budget, data published today by the Government and Olympic Delivery Authority (ODA) confirms.

As part of the Government’s measures for reducing the national budget deficit, the Olympic Delivery Authority’s (ODA) lifetime budget has been reduced by £27m. This has been achieved through efficiency savings and procurement gains, without any reduction in the programme’s delivery. The overall public sector funding package for the Games now stands at £9.298bn.

Figures from the London 2012 Olympic and Paralympic Games Quarterly Economic Report show a like for like decrease of £51m in the Anticipated Final Cost (AFC) of the part of the Games being delivered by the ODA - from £7.267bn in May 2010 to £7.216bn in June. An increase in the level of VAT to 20 per cent from next January; changes to Employers’ National Insurance; and Insurance Premium Tax increases announced as part of the emergency budget, have added an additional £45m to this figure taking June’s AFC to £7.261bn equating to an overall decrease of £6m.

Over £100m of savings have been achieved in the last quarter, of which £27m has been returned to the Government as part of the wider efficiency savings announced in May. These £27m were made through efficient delivery and procurement gains and comprise:

£13m from construction site security

£11m from the IBC/MPC

£3m from smaller changes to the Basketball Arena and Velodrome

In total around £700m in savings have been achieved by the ODA since the November 2007 baseline budget was agreed. The majority of these savings have been used to control the budget by offsetting cost increases in other areas of the programme and helping to fund the impacts of the credit crunch, thereby reducing calls on the contingency.

Minister for Sport and the Olympics, Hugh Robertson said:

“As we approach two years to go until the Games, and with over two-thirds of the construction phase complete, we are in an excellent position.

“The ODA have done an excellent job thus far, delivering a complex project on time and within budget despite the credit crunch. Today’s report shows they have delivered £27m of savings as part of the government’s measures for reducing the deficit while keeping the whole Olympic programme intact. It also shows that the Anticipated Final Cost remains stable despite the impact of the forthcoming VAT and tax increases. Given we are halfway through the most complex year in construction terms this shows just how well this project is being run.”

Olympic Delivery Authority Chief Executive David Higgins said:

“With a little over two years to go until the Games we are in good shape - on schedule and within budget.

“We have hit all our milestones for 2010 and announced the next set which will take us to next summer when the main venues and infrastructure needed for the Games will be complete. As we have done since the very start of the project we have made savings through driving greater efficiency on a range of projects.

“We have made a total of £700m savings in this way, most recently absorbing both the agreed £27m reduction in the ODA’s budget and the impact of the Emergency Budget. We will continue to bear down on costs wherever possible whilst ensuring we deliver what is required for both a fantastic Games in 2012 and a lasting legacy afterwards. “

The changes in the Anticipated Final Cost (AFC) are as a result of:

a reduction in forecast costs of £17m on the Main Stadium through savings made by efficient delivery and procurement gains;

forecast savings of £29m on the IBC/MPC of which £11m has contributed to the ODA’s £27m budget saving;

forecast savings of £22m on park security of which £13m has contributed to the ODA’s £27m budget saving;

a potential cost increase of £7m on the Aquatics Centre. This is due to the complex design and the need to ensure the project remains on schedule to complete on time next summer;

a potential cost increase of £31m in the Enabling Works project due to an increase in the volume of materials being processed through the on-site soil hospital.

At this stage no further contingency has been released for these future cost pressures as it is anticipated that they can be covered in full or in part by savings going forward.

Other key points from the July quarterly report are:

the gross allocation of contingency to date on the programme remains, as last quarter, at £790m. There is almost £1.2bn of contingency available - more than the value of assessed risks;

preparation of the venues and infrastructure in the Olympic Park for the Games is 70 per cent complete. The ODA has hit all of its build milestones to date including the Velodrome and Aquatics Centre structures and roof. All venues are on track to meet scheduled handover dates to LOCOG.

Notes to Editors

The public sector funding package for the Games announced in March 2007 was £9.325 billion. Of this £6.1 billion was identified as the Olympic Delivery Authority budget, with around £2 billion contingency and £1.2 billion for non-ODA activities such as wider security and support for elite and community sport. On 24 May 2010 the Government announced that the ODA will make £27m of in-year savings from the current financial year taking the public sector funding package to £9.298bn.

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